The proposed research is the first resubmission a competing continuation of an R01 examining the effectiveness of a cognitive behavioral treatment (CBT) program for posttraumatic stress disorder (PTSD) in persons with severe mental illness (SMI). This research builds on the success of our first randomized controlled trial, in which CBT delivered by academically trained and employed (e.g., doctoral level) clinicians improved PTSD and related outcomes more than treatment as usual in clients with SMI living in rural New Hampshire and Vermont. The proposed research will extend these findings by: 1) having treatment provided by frontline (e.g., masters level) clinicians, 2) focusing on predominantly minority clients with SMI and PTSD living in urban New Jersey, and 3) comparing the CBT program with a brief pilot-tested Psychoeducation program for PTSD. Two-hundred clients with SMI and severe PTSD will be randomized to either the 12-16 session CBT program or the 3-session Psychoeducation program, with follow-up assessments conducted after treatment, and 6 and 12 months later. Analyses will focus on testing the hypotheses that CBT is more effective than Psychoeducation at improving PTSD severity and diagnosis, other symptoms, quality of life, community functioning, as well as decreased use of acute care services and direct treatment costs. Relevance: Trauma and PTSD are common problems in the lives of persons with SMI, and are associated with considerable distress and impairment in functioning. The CBT for PTSD program is the first standardized treatment for PTSD in this population shown to be effective in rigorous, randomized controlled research. The proposed research follows up these important findings by evaluating whether frontline clinicians can implement the CBT program with clients living in urban areas, and examining its impact on the long-term outcomes of quality of life and community functioning, as well as service utilization and costs. The results of this research will bring the field one step closer to having an evidence-based practice for trauma and PTSD in clients with SMI.